The S&P Is Turning Into A Tech Fund

A few quick hits today.

We've looked once or twice at the Simplify Multi QIS Alternative ETF (QIS). The fact sheet boasts exposure to 25+ quantitative investment strategies. Here's the chart.

The yield is modest so the total return is slightly better but the fund is down a lot. The holdings are pretty opaque unless you know what FOXBP1TRS and SBABOATRS are. Some of the holdings are intuitive but more power to you if you can figure out how the strategies are actually positioned. The easy conclusion is that the fund is too complex. 

Last August I questioned how the fund was still open. This post had a little color about QIS being intended as a fixed income sort of proxy like 60% equities, 20% bonds and 20% QIS. Based on the fund's result, there's no point in backtesting it. When QIS first started trading, I backtested the concept with other funds which looked good, I said the concept seems valid but the fund somehow hasn't lived up to the concept.

This next chart compares YieldMax Tesla (TSLY) which is a covered call strategy and the GraniteShares Tesla Yield BOOST (TSYY) which is a put selling strategy.

The chart is price only. Anyone taking out the income, that's a lot of bleed. I've said several times that I think selling puts is a better way to go, note that TSYY is selling puts on a levered Tesla single stock ETF, but there is no way the price of a fund is going to keep up with this kind of "yield."

Tell your friends how these work so they don't spend 85% of their principal in 16 months.

Bloomberg says that SpaceX is targeting a $2 trillion valuation for its IPO which might be coming as soon as June. Anthropic is currently valued at $380 billion and OpenAI is at $820 billion and both intend to IPO at some point. At $2 trillion, SpaceX looks like it would be the sixth largest in the S&P 500, Open AI at $800 billion would be tenth or 11th with Anthropic further down the list obviously.

SpaceX would probably go into the industrial sector but still be pretty techish. I'd expect Anthropic and OpenAI to end up in the tech sector. All three stand to make the S&P 500 even more tech/communications centric than it already is from it's current 43% (down from 45%) up closer to 50%.

That will potentially be a lot of volatility, really a lot. Ways to address that include building the portfolio at the sector level, adding and small doses of negatively correlated holdings or using different factors that underweight tech. 

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